Melbourne apartment development hits historic high

Craig Butt and Christina Zhou

More apartments are being built in Melbourne than at any time in the city's history, which experts say is being driven largely by overseas investment.

It has also sparked fears of a glut of new apartments, causing property prices to drop once they come to be re-sold.

Almost 6000 homes have been completed or are set to be finished by the end of this year, nearly three times the annual average over the past decade, City of Melbourne development activity data shows.

And almost 6000 more under construction in the Melbourne council area, which covers areas including the CBD, Docklands, Southbank and Carlton, are set to be finished in 2015.

More than half of the 11,546 homes set to be completed in 2014 and 2015 will be in the CBD.

In Carlton, 1361 new homes will be completed over this period, more than the number built between 2002 and 2013.

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“The next couple of years are going to have the biggest annual supply of apartments that Melbourne has ever seen,” Knight Frank research director Richard Jenkins said.

He said offshore developers were driving apartment growth and that their appetite for Melbourne’s property market was set to continue, estimating they were responsible for 40 per cent of upcoming residential developments in the city.

But BIS Shrapnel senior manager Angie Zigomanis said there was potential for oversupply, particularly in Docklands, Southbank and the CBD.

He said investor-grade apartment projects in these areas had limited growth prospects, and in some cases, prices could even go backwards.

“If you’ve bought something new, off the plan today, I suspect you’ll find … three years from now, it’ll be less than what you paid for it if you tried to resell it,” he said.

A further 18,737 homes from 99 developments have been approved and are set to commence construction within the next two years. Another 48 developments are still seeking planning approval, which would add another 23,241 homes. Almost half of these dwellings are destined for the CBD.

“We don’t know how long this increase of supply will be sustained, or how many of the proposed developments will proceed,” Melbourne council deputy planning chair Stephen Mayne said. “What this research does is show us what Melbourne could look like in the next decade.”

Savills divisional research director Glenn Lampard said it was unlikely all the planned or mooted developments would go ahead.

“If the vast majority of them were built we would certainly see an oversupply, but I would imagine it would be absorbed as the population increases,” he said.

Lord Mayor Robert Doyle said Melbourne was the fastest growing city in Australia and that housing supply was keeping up with demand.

“Melbourne has become a magnet for residents and business and these latest figures are the latest chapter in our success story,” he said.

Between 2002 and 2012, the number of dwellings in the City of Melbourne almost doubled, reaching almost 60,000.

Assuming all the developments under construction are completed, there will be at least 37 "super dense" city blocks packing in between 150 and 500 homes per hectare in Melbourne by the end of 2015.

In 2012, 24 blocks were super dense and in 2002 there were just three.